An entrepreneur’s business journey is not without its share of financial difficulties. Being confronted with financial challenges and uncertainty can put your mental health at risk and put your confidence as a business owner at risk. Regaining control is frequently an effective treatment for anxiety. As a result, there are financial resources and tools you can use to keep track of your finances and alleviate stress.
Businesses can get the additional working capital they need to invest in their growth and maintain healthy cash flows from a line of credit, which is a great financing option. You can take control of your finances and buy yourself the time you need to plan your next steps with a business line of credit. A business line of credit can help you run your business in a few different ways.
Take charge of your cash flow. Businesses of all sizes struggle with erratic cash flow. Running out of cash is the most common cause of new business failure, making cash flow one of the most stressful issues for small business owners. A line of credit can help you overcome cash flow issues and guarantee that you will always have enough money to pay for major expenses.
A line of credit, like a credit card, gives you access to a revolving fund balance.
This indicates that as you pay off the line of credit, its balance will increase. Compared to business credit cards, lines of credit typically offer higher credit limits and lower interest rates.
To alleviate cash flow issues, many owners of small businesses use personal savings, loans, or credit cards. However, it is a good idea to keep your personal and business finances separate so that you can simplify your taxes and safeguard your personal assets in the event that your business suffers significant losses. A business line of credit can give you peace of mind because you’ll know that your money is used wisely.
Finally, depending on your business credit history and the lender you choose, getting approved for a line of credit may be easier than getting bank loans or even business credit cards. You can get the money you need to close those cash flow gaps as soon as possible because online lenders like Fundbox typically have approval processes that are quicker than those of traditional lenders like banks or the Small Business Administration (SBA).
Reduce the stress on accounts receivable. It doesn’t matter if you’re waiting for customers to pay invoices or if sales are slower than usual; it can be difficult to deal with bills between paydays. According to 89 percent of businesses, their long-term growth objectives have been affected by late payments. Paying on time can hold you back and force you to give less importance to urgent business objectives and needs. You can rely less on the timing of your accounts receivable to cover expenses with a business line of credit.
Uncertainty is a significant source of stress for some small businesses.
When projects take longer than expected to complete for service-based businesses, payment may be delayed. Not every product sold in retail stores will sell out quickly. That sense of uncertainty is amplified when sales slow and payments do not arrive. In addition to assisting you in managing fluctuating finances to keep your business running smoothly, providing yourself with a financial safety net relieves you of the what-ifs that accompany late payments.
You can also get business lines of credit to help you keep up with your accounts payable. When you pay your own vendors late, your relationships with them suffer. Late payments can have a negative impact on your company’s credit score if they are reported to credit bureaus. Your accounts payable are no longer subject to your accounts receivable with a line of credit. You will be able to pay your vendors on time as the balance increases, and you will only need to pay the line of credit down once all of your accounts receivable have been paid.
Expand your business in new ways If you’re an entrepreneur, you probably always look for new ways to innovate and give your customers more of what they want. A business line of credit can help you get the money you need to hire more workers, buy more tools or supplies, test out new marketing strategies, and expand your company.
If you have access to funding, you can stay competitive and take advantage of opportunities as they arise. This enables you to increase your revenue and acquire new customers over time.
When it comes to expanding, most businesses struggle with fundraising. Minority-owned businesses face significant obstacles when seeking venture capital funding. Lines of credit can be very beneficial to businesses of any stage that lack the time or resources to raise additional capital from investors.
By using the revolving balance on the line of credit, you can use the available credit limit repeatedly.
When you see returns on your investment in expansion activities, you can use the increased revenue to pay down the line of credit, which will then be available for you whenever your next great idea arises.
Additionally, an investment in process enhancements to increase productivity can be made with a line of credit. With funds from a line of credit, you can fix equipment and purchase things like a more advanced point of sale (POS) system that makes it easier to track inventory or a larger commercial oven that can bake more pastries to meet demand. When your business has the money it needs to keep up with the market and satisfy or exceed your customers’ needs, you can be sure that it is ready for growth.
Additional sources of financial assistance Increasing your financial literacy or hiring a financial advisor can boost your self-assurance regarding your company’s finances. At banks that focus on serving small businesses, you can benefit from the knowledge and experience of the team members.
When you’re having trouble with cash flow, check to see if there are any expenses that can be cut, and make sure to look over the repayment terms you’ve set for your clients.
Creating a cash flow forecast and preparing for unforeseen expenses can also provide some peace of mind in the midst of uncertainty.
If your business has experienced a crisis, the Small Business Administration (SBA) offers disaster loans and other options for emergency financing. You can also check to see if the small business development organizations in your community offer emergency financing and assistance in a similar way.
Learn more about how a line of credit can help you run your business more effectively and grow it successfully in our guide to business lines of credit.
Fundbox and its subsidiaries do not provide advice regarding taxes, legal matters, or accounting. This information was only compiled for informational purposes; it should not be used as legal, accounting, or tax advice. You should consult your own tax, legal, and accounting professionals before doing anything.